Today we face a climate of ever increasing misdirection by popular media. This site, along with others, aims to reveal the reality of America and the loss of fact inherent to the over riding theme of our current political and social confusion: Purposeful deception.

Saturday, November 19, 2011

America's Student Loan Debt Bondage

Higher education today isn't
like it used to be. US
students face crisis conditions. Washington and lenders wage financial war on
them. In addition, dozens of budget-strapped states cut funds to public
colleges and universities.

Students are directly
impacted by sharp tuition hikes (double-digit at some schools) and less
financial aid. As a result, many thousands are entirely shut out. Others
relying on student loans face permanent debt bondage.

By end of 2011, student loan
debt will top $1 trillion. It already exceeds credit card indebtedness.
Moreover, in the past year alone, students borrowed over $100 billion, double
the amount a decade ago adjusted for inflation.

Borrowing is one thing, repaying
another. Therein lies the rub. Many former students end up debt slaves for
life. With interest, collection charges, penalties, and other costs, some
burdens exceed $100,000, Over their lifetime, they can rise five-fold or more
for some.

Repaying graduate school
debt pushes it higher. New medical professionals can owe $200,000 or more at
first. An unidentified one said he'll pay $1,000 a month for the next 30 years.
With higher inflation, monthly costs will rise exponentially.

Many end up trapped for life
because debt can multiply five-fold or more over its lifetime. As a result, a
new medical professional paying $1,000 a month now may owe $5,000 or more
monthly in 30 years, and if obligations aren't repaid, burdens rise annually.

It showed only 37% of
student loans are paid on time. Another 15% of students default, 26% are
delinquent, 12% use forbearance to temporarily suspend payments, and 11% defer
them because of re-enrollment, economic hardship or unemployment. However,
doing so increases burdens as interest and other costs rise.

Moreover, default data
greatly understate an exponentially rising burden, facing growing numbers of
students indebted for life and unable to repay. More on that below.

Student loan burdens
increased another 5% in the fiscal year ending September 30, 2011. Average debt
hit a record high. At least two-thirds of the class of 2010 graduated with
student debt, besides others incurred for them by parents or other family members.

Finaid.org's Mark Kantrowitz
said "Student debt goes up and it doesn't ever go down. We're clearly
heading in the direction of decreased college affordability." Lower income
family students already are greatly impacted.

Kantrowitz estimates class
of 2011 loans by students and parents at $34,000. Whether or not they graduate,
many students have debt burdens approaching or exceeding $100,000. If repaid
over 30 years, it's multiples higher, and defaulting brings no relief.

Once entrapped, escape is
impossible. Bondage is permanent, and future lives and careers greatly impaired
or ruined.

As a result, lenders may
garnish wages, income tax refunds, earned income tax credits, as well as Social
Security and disability income to assure defaulted loan payments. In addition,
defaulting may cause loss of professional licenses, making repayment harder or
impossible.

Moreover, under Congress'
default loan fee system, holders may keep 20% of all payments before any
portion is applied to principle and interest. A borrower's only recourse is to
request an onerous, expensive "loan rehabilitation" procedure.

It requires extended
payments not applied to principle or interest. A new loan must then be
arranged, incurring additional fees.

As a result, many former
students face permanent debt bondage. In addition, no appeals process allows
determinations of default challenges under a process letting lenders rip off
borrowers, many in perpetuity.

A congressionally sanctioned
conspiratorial alliance of lenders, guarantors, servicers, and collection
companies enrich themselves hugely at borrowers' expense. They thrive from
extortionist fees and related schemes. Millions end up scammed.

Moreover, lenders thrive on
bad debts. They derive income from inflated service charges and collection
fees. Today they're more than ever as default rates soar.

Lifetime rates now affect
one-third of undergraduate loans, higher than for subprime mortgages. In fact,
they exceed other lending instrument burdens and are rising.

Obama's new student loan
repayment plan (unveiled in late October) is more scam than relief.

Since taking office, he
created few jobs, did little for beleaguered homeowners under water on
mortgages or facing foreclosure, and promises harder times head under planned
austerity on top of cuts already made.

Few students will benefit
from his new loan repayment plan, none facing default. Federal student loan
repayment schedules will be modestly relaxed. Congress already approved them.
Students who consolidate multiple loans may save half of 1% on interest
charges.

Instead of mandated payments
up to 15% of annual incomes over 25 years, indebted students will pay up to 10%
over 20 years. Qualifying students will get debt forgiveness after 20 years.

Out of 36 million indebted
current and former students, less than half a million choose repayment caps
because of onerous terms. Expect fewer numbers to accept Obama's.

Pre-2008 borrowers are
excluded. So are those with private loans and others in default. Only federal Stafford, PLUS, and consolidated Direct Loan and Federal
Family Education Loan borrowers are covered it they qualify.

As a result, expect few
indebted students to be helped. Total indebtedness will rise, not fall. Rising
tuitions and fees will increase growing burdens. Relief is nowhere in sight. At
a time Wall Street practically borrows free, federal education loans cost 6.8%.
Over time, interest burdens alone increase exponentially.

The Department of Education
scams borrowers instead of helping. In today's environment, student and other
federal loans should be near interest-free.

Stephen Lendman lives in Chicago and can be
reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at
sjlendman.blogspot.com and listen to cutting-edge discussions with
distinguished guests on the Progressive Radio News Hour on the Progressive
Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at
noon. All programs are archived for easy listening.

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